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Why tethering plans don't make any sense

This guest article was submitted by Ben L.

Internet_tethering Cellular carriers try to make a dime off of their customers wherever they can. With all the hidden fees and overage charges, it would seem that their goal is to suck every penny from every customer they have.

What might be more ridiculous, though, is that consumers actually stand for it . . . even when the cell companies find ways to make us pay more for the same product.

Our subject for this discussion is cellular tethering plans. Tethering is a very simple concept. You own a cell phone that can browse the web through data channels provided by the carrier. By connecting your cell phone to a computer via Bluetooth or USB, you can share your phone’s internet connection with and browse the web on the computer. Simple, right? Of course.

So why is it that many carriers require "tethering plans" that cost more than the data package a web-capable phone user is already paying for? I’ve searched and searched but have never been able to find an adequate answer to this question.

Let’s take a look at an example:

The iPhone 3GS on AT&T's network in the United States is equipped with HSDPA 3G, which is capable of providing up to 3.6Mbit/s of downlink data access. Users have to pay $30/month for the iPhone 3G data plan. The iPhone OS 3.0 update has recently added support for tethering; AT&T hasn't yet enabled the functionality, but how much extra will it cost when they do? If we allow history to be our teacher today, we can make some assumptions based on the already existing Blackberry tethering plans. According to this chart, it costs $45/month for unlimited data usage on a Blackberry. However, tethering isn’t included with that package. For that "feature," customers have to pay $60/month for unlimited data plus the "tethering add-on."

But what product are you actually getting for that additional hard-earned cash? As far as I can tell, none. If you tether an iPhone 3GS to a computer, do you know how quickly you could consume data? 3.6Mbit/s, just the same as if you were using the phone untethered. You really aren’t getting anything extra for the added cost.

Imagine this: You pay a cable TV provider $20 a month for cable television. That $20 buys you whatever comes down that cable and you can plug it into whichever TV you want. If you normally watch TV on a 15” screen but want to plug it into a new 30” one day, should you have to pay more? Of course not! That would be absurd, and you certainly don’t have to call your cable provider to get permission to switch TVs. In the wild world of cellular data packages, however, paying for a tethering plan is like paying to plug your cable into a bigger TV.

You could easily consume the same amount of data directly on your iPhone 3GS as you would if it were tethered to a computer. So where is the justification for paying more for the functionality?

If you ask me, the cellular provider doesn’t even have a part in the process. Connecting an iPhone to a computer via Bluetooth, for example, is handled completely by the devices themselves with no interaction from the carrier; sending data from the iPhone to a computer has nothing to do with the carrier either. To clarify, you can connect your iPhone to an existing Wi-Fi hotspot and send that data via Bluetooth to a computer that doesn’t have built-in Wi-Fi. This demonstrates that tethering doesn’t have anything to do with the carrier, as the process itself is not dependent on where the data comes from (Wi-Fi or 3G).

All of this is in the face of the upcoming announcement of AT&T's iPhone tethering plans. There have been rumors that the plan could cost $55 in addition to the $30 fee that users already pay. AT&T has called this $55 rumor "false," but that doesn't mean they won't be charging an extra fee; all it means is that they won't be charging $55 extra! So if we base our guesstimates on the existing Blackberry tethering plan instead, users would still be expected to pay twice as much as what they're paying now (up to $60/month) just for the option of sharing the connection with a computer, a process that is already built into the device and handled entirely without AT&T's participation.

Can someone please tell me why we stand to pay something for nothing?

Ben L. has had an interest in all fields of technology for many years. His fascination with mobile technology started back in the days of the PDA; he has watched and blogged as the UMPC, netbook, and MID began to dominate the mobile technology world and continues to wonder where mobile tech will take us next.

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Guest Contributor

Pocketables is a US-based online tech magazine that brings news, insights, opinions, and comprehensive reviews on various mobile computing devices, portable technology, and related topics to a global audience. We focus on devices that fit into pockets of all sizes, from jeans and jackets to backpacks and purses. The gadget experts that comprise our staff produce high quality articles and original features colored with real-life use of products over weeks and months, not first-impression opinions formed within hours or days.

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25 thoughts on “Why tethering plans don't make any sense

  • Avatar of Steven Law

    Oh, it’s quite simple. Somewhere, the bean counters realized that most folks won’t be staring googly-eyed at a 3″ screen for hours on end, slurping down data. Most folks will neer come close to the 5GB limit on their phones, so they pay less in bandwidth costs. However, once you add in tethering to the equation, everything changes. Streaming video on a laptop? Uhhuh. Skype Video calls? You bet. Download a tv show you missed last night because you were in a sales pitch that ran over? Why not?

    So you’re not exactly paying for nothing; you’re paying for the data usage beyond what was predicted had you limited yourself to downloading songs on your phone and reading mobile versions of the New York Times and Myspace. I’m not saying this is fair or right; it just happens to be how it is.

    Reply
  • Avatar of Jenniffer G.

    To bring things into similar perspective, there are virtually no differences between all of the unlimited data plans: the $15 unlimited plan (supposedly for dumbphones/featurephones), the $30 one for “smartphones”,” and yet another $30 “iPhone” one. They all provide unlimited data access on your device. Yet why segregate it this way? It’s a marketing ploy of course, but I think it’s gone a little too far to be just a marketing ploy now. AT&T should have “More Rape” somewhere in their motto.

    They (and probably other cellphone carriers) should just cut this “tethering option” bs out. I could go on several separate tangents just based on this one topic, as well as many other things that AT&T is doing horribly wrong, but I won’t…

    Reply
  • The issue is that the capability exists to consume the same amount of data whether tethered or not. You shouldn’t have to pay more to use the data that is supposedly provided to you with the $30 data plan that you already pay for just because you are essentially using it on a different screen.

    Reply
  • The issue is that the capability exists to consume the same amount of data whether tethered or not. You shouldn’t have to pay more to use the data that is supposedly provided to you with the $30 data plan that you already pay for just because you are essentially using it on a different screen.

    Reply
  • Well I can toss in a distinction between the dumbphone and smartphone plans, or at least this was how they were defined 5 years ago. The dumbphone’s were expected to only do simple websites, so only port 80 (http) was opened and often it went through a proxy that attempted to simplify the websites. The smartphone plan was considered a true data plan, allowing you to connect to email, or even VPN, or any random port on a third-party server assuming you had the program to make use of that port.

    The idea is mostly antiquated today due to more and more java-apps available on even the dumbest phones, but that was the original thought.

    Reply
  • Avatar of GeoffreyM

    The iPhone, as an example, cannot process data coming down nearly as fast as a computer. Therefore the maximum speed of the data connection cannot be hit the way it could using a computer. In addition, as Steven Law said, the actual amount of time spent using the data connection and the data intensity of said connections will not be as high as with a computer–the difference between a few minutes of surfing vs. an hour. Total usage and load on the network will be significantly higher with tethering involved.

    In addition, the a video streamed on the iPhone at the maximum possible resolution is smaller than that available to be streamed on a computer, so the size of that video is much larger on the computer.

    I don’t mind paying for tethering and think that it’s completely acceptable to charge a reasonable amount for the option, $15 in the BB example. Considering a dedicated 3G modem plan costs $60 for their “unlimited” plan, it’s a great savings.

    All this said, I strongly believe that with tethering and with dedicated 3G devices, the 5G limit needs to be revisited. I haven’t yet hit that limit myself, but I’m sure it’s quite possible to do so.

    Reply
  • Avatar of Joseph G. Mitzen

    >The issue is that the capability exists to consume the same amount
    >of data whether tethered or not.

    Ben, as has been already pointed out, the capability isn’t there. I could tether the laptop, plug it into an AC outlet, and run a bittorent server 24/7. You can’t run a (most?) cellphone on AC so the battery’s going to give out, and the CPU probably couldn’t handle being a server. Other examples about streaming video were already given. As was also touched on, with tethering, the amount of bandwidth consumed at once will probably be higher.

    >You shouldn’t have to pay more to use the data that is supposedly
    >provided to you with the $30 data plan that you already pay for
    >just because you are essentially using it on a different screen.

    You’re being charged more because it’s expected that you will use more (and more often, and more at once, and tax the network more). Think on an all-you-can-eat buffet. Most (all?) will charge a different price for children and adults. Is that something horrible? No. They’re basing their costs on how much an average person will eat, what it will cost them, and how much they have to add on to make a decent profit. Children are smaller and eat less (just like your cellphone, whether you accept that or not) so the restaurant can charge less and still make a profit.
    You could argue that technically it’s all you can eat and that you are paying more than the child for the “same amount”, but as I hope is clear, that doesn’t make sense economically or practically.

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  • Guys I’m sorry to say, but the iPhone has the ability to download data at the same rate whether you are tethered or not. Simply connecting the device to a computer doesn’t enhance the abilities of the device. What I’m saying is that the ability to download data at 1.6Mbit/s is inherent to the device itself. I realize that it is leas likely that someone will use a ton of bandwith on the phone itself, but the fact is that they COULD. By paying to tether, there is nothing that changes with the device or makes it fast or changes it in any way. It can still Dow load data at 3.6Mbit/s regardless.

    Reply
  • Both points are technically correct, but the points of view are slightly different.

    The capability is 3.6Mbit/s.

    Ben is looking at this is that it should be 1-charge, based striclty on download speed.

    Jen is stating that it’s a combination of speed AND volume, and that assumptions were made in setting the price.

    You are both right, but isn’t the volume already capped? If a pre-existing cap exists (5GB), then tethering shouldn’t make a differrenece. If the volumes is “unlimited”, the charge for it that way.

    In the end, the varying pricing is confusing, misleading, and just downright wrong. And since all carriers pricing appears “identical”, there is no real competition anyway.

    Reply
  • Avatar of GeoffreyM

    I love the all-you-can-eat buffet analogy.

    Reply
  • Just because someone can doesn’t mean they will.
    In theory I COULD make someone pregnant every day. I won’t because my wife won’t like it!
    In the UK we had a week-end unlimited mobile calling plan. When I was in customer services I was shocked to find that some people actually used their phones for as much of that 48 hours that they COULD. When did they sleep? Just because a capability exists, don’t expect it to be used to the max, seems to be the costing strategy. There will be the oddball who will actually make full use of the capability, but they will be a tiny minority. That is until you change the way the device is used. That’s why there is a tethering charge.
    I actually agree with Hoot69 that they should changing the pricing plans – but they won’t as this is poor marketing (they think) and after all you COULD use the phone to its max if you wanted to.

    Reply
  • Actually, I hear with AT&T’s iPhone plan (at least before they killed the 3G prepay add on thing) there was no “limit” even though in other contracts (that weren’t prepaid or had to do with the iPhone) stated a 5GB limit. I’ve also read of users on this prepaid play using up much more than their 5GB “allowance” without any repercussions (by tethering, 3G modems, etc). Although that may have eventually led to AT&T closing the prepaid iPhone data plan XP

    Point is, it seems that the “regular” iPhone data plans don’t have this data cap (implied or not) as the provider knows that 98% of its subscribers won’t even touch 1gb worth of data per month. Same with the buffet analogy posted above. The provider has to charge extra and put a cap on bandwidth consumed because the existing data lines they have aren’t meant for the extra 4gb*(x amount of users) per month. With all this emphasis on Web 2.0 and media rich sites, providers KNOW that data usage on the existing lines will jump exponentially. They have to maintain a quality and price ratio that will attract customers. I doubt anyone will pay $10 a month for “unlimited” 3G wireless that works for 10 min then kicks you off due to network over-usage.

    I’m not trying to defend the companies, in fact just the opposite. I love tethering, and I would never want to pay more for it! I’m just trying to help clear things up as it seems a lot of people have misconceptions about the whole wireless data issue.

    As for tethering, I say, leave it free so the geeks who know about it can make use, and save already busy CSRs who don’t need people asking them about why their “bluetooth isn’t internetting with my iphone!”

    Reply
  • AT&T have an expectation of the sort of traffic that iPhone users will generate on their 3G network. At present, AT&T can largely control the sort of data that iPhone users generate on their network due to the controls around the Apple iPhone application store. This data is mostly going to be restricted to general HTTP traffic with the odd iTunes download here and there.

    Why does the SlingPlayer for the iPhone only work over WiFi? Simply because AT&T put pressure on Apple to prevent Sling from releasing a version of the app that is agnostic towards the type of data connection it is using.

    Allow tethering on the iPhone and suddenly AT&T loses that control and suddenly a load of iPhone users will be routing VPN traffic, bittorrents, Slingbox video streaming etc over their 3G network which they weren’t expecting before.

    This, in and of itself, shouldn’t necessarily justify an increased charged for tethering, but in the US you are largely hosed by the networks at every step. I’d imagine that if AT&T had launched the iPhone with a tethering ability on day one, they’d have been charging way more than $30 a month for the privilege and given than *most* iPhone users will never tether, this is probably better for most of their customers.

    Reply
  • I agree with what you and Steven are saying but all it does is prove that the tethering is not the core of the problem, data usage is the problem.

    Thus Ben’s point is valid that providers are using tethering as an excuse further gouge customers. It’s possible that I MAY transfer more data volume but I MAY NOT transfer more data volume (bandwidth is theoretically still 3.2Mb for both).

    For example if I only use 5GB a month tethered, is that any different than using 5GB on the phone itself? From the ISP perspective, no both used 5GB a month at 3.2Mb. The difference is I had to pay a big premium for my 5GB that the non-tethered user didn’t.

    Thus tethering should be enabled by default for all that want to use it and not an excuse to get more money from customers. The pricing structure should be tiered based data transferred per month; if all I use tethering for is to get email like the phone user we should both be treated the same.

    Reply
  • Avatar of GeoffreyM

    I suspect the additional charge for tethering is also to limit the number of people who do it. Those who really want/need tethering will pay the fee. Those who are unwilling won’t. This is another way that AT&T can exercise control over network load.

    Reply
  • Avatar of COCOViper

    I work for a telecom provider in the US and I can say it boils down to a couple items:

    1) We would obviously prefer it if you had your smartphone with a data plan PLUS a data card for your laptop with an additional plan. Besides the fact that you are paying for both plans, having a customer with multiple devices and lines decreases churn plan and simple.

    2) While you can technically argue that whether you’re using data through the iPhone’s browser / apps or just on a laptop tether to the iPhone is the same, it’s not actually true. Even though the iPhone drastically increased the ability to actually use the web, it’s still not the same experience as on a desktop. Thus any user is simply going to use more data when they have a laptop running modern browsers and access to flash sites and video sties like Hulu. This is why data card plans on laptops are $69, but data plans on phones are $30.

    What really needs to happen is an option that removes the 5GB cap all the carriers have + allows tethering through your phone if you upgrade your data plan from the current “phone only” $30 plan to a $69 data plan. A voice plan would then exist in addition to this of course. Also- let’s be real…texting should also be covered in this plan.

    That would be fair IMO. What do you guys think?

    Reply
  • Avatar of Timepilot84

    I would agree with you if not for this question: Do users who tether use the same amount of data as users who do not tether? The accounts we have (well, I have, anyways)now offer unlimited data, because the Cellco’s know that the average user won’t use more than a couple hundred megs per month. I’m sure there are users who do use slightly more, and others who use slightly less, but the prices are set so that with average usage the Cellco’s can make their absurd profits with a minimal amount of network capability.

    If the usage profile of the average tethering user is significantly higher than the average phone user, then this is going to be reflected in their pricing scheme.

    Another reason they charge more is that they know that the people who need the mobile data service have no other option. Personally, if I needed mobile data I’d get a Clearwire account. That’s not available to you Philistines out in the rest of the country yet, so you’re stuck paying for, essentially, an oligopoly for mobile data.

    Reply
  • Avatar of PeterPTR

    > Thus any user is simply going to use more data
    > when they have a laptop running modern browsers
    > and access to flash sites and video sites like Hulu.

    Thats the reason folks.

    You “could” use the same amount of data on a cellphone with or without tethering. But the “avarage” usage will be way lower if you only use your cellphone.

    The Business Plan of a data plan is planned on the “avarage” usage of customers and not the possible peak usage. If the avarage usage jumps up by a great margin, the business plan will fail.

    On a laptop you can use a lot more data, because there are a lot more ways to consume data than with a cellphone.

    Just for example …
    – Updates for Windows or other Programs you don’t have on your cellphone
    – HD youtube, because it makes a difference on a larger display
    – other HD video Streaming
    – downloading large files
    – perhaps even P2P Filesharing

    Reply
  • Avatar of Curt Carmack

    Interesting point on the “Business Plan.” One difference with the iPhone, however, is that many non-business users ($30 plan; i.e., without Exchange Active Sync usage) actually use far more data than business users ($45 plan), as a lot of business users don’t use applications like Shoutcast or do heavy web surfing on their devices. The iPhone may be the first phone where the carrier got the plans backwards in terms of who should pay more.

    Reply
  • $60/mo for a tethering add-on plan
    vs
    $60/mo for a 3G dongle or card

    Where the advantage for the former is: you don’t have to worry about/fumble-with a dongle or card, worry about card drivers for your OS (if you’re running something better than Windows), etc.

    I’ll take tethering over a separate data plan and device, thanks. The only reason why I would go for the Mifi or a Cradlepoint solution is that my current phone (G1) doesn’t offer tethering support (without hacking it, that is). If it did, end of discussion.

    Reply
  • I have an AT&T Tilt which is the HTC Kaiser. I have used PDAs since they first came out. While the HTC had Win Mobile 6.1 and has many data intensive capabilities such as handling pop mail, browsing, GPS, and tethering I did not buy the phone for data usage. I just did not want to carry a cell phone and pda.

    I use the Internet mostly for research and don’t have the time for games and most of the other things that I feel are useless time wasters. Facebook, twitter, instant messaging. I just don’t get it. Phone rates are so cheap if I want to communicate with someone I call them!

    Trying to use such a small screen for browsing, and I have tried it, I have found frustrating and ultimately ridiculous. Why anyone would prefer messaging when they have voice capability is beyond me. Yes, people tell me they are in a meeting so they message their friends or their spouses. Well, they should be paying attention to what is going on in the meeting rather than trying to multi-task doing something personal on company time.

    I find it absolutely amazing how advertising which depends upon a bevy of psychologists who try and figure out how to get us to buy products and services that we really don’t need.

    I know a guy who is a consultant. I just spoke with him and he has used 34 gig since the first of the month. He is using Verizon and tethering. I don’t know if Verizon allows you unlimited tethering or if there is a cap. The 3 gig cap with AT&T makes the use of tethering useless for me.

    I am moving and thought perhaps I would use my cell phone for everything; forget the land line and cable for broadband. Looking at the rate plans AT&T provides does not make this solution cost effective as I don’t use the phone for data which I would have to pay for in addition to tethering. Cable does not have a limit to how much data I use.

    Anyway, I think all of this stuff is nuts!

    Reply
  • I can actually give you a good reason, albeit a stingy one, since I actually work at a wireless store.

    The reason I gather from the looks of it, is that most mobile devices (Yes, even the iPhone) are not capable of delivering a web browsing experience in terms of page rendering and such that a normal laptop PC is capable of, nor able to offer the ability to have tons of tabs open, with multiple streaming applets such as last.fm at the same time as watching youtube or using the wireless connection to play WoW/FFXI/Aion/MMO of choice with friends whilst still yelling at others on a ventrilo server all over a 3g connection.

    My hacked G1 allows me to do all of these things for free, but in it’s current state AT&T is going to try to aleviate the traffic on their own network by adding an additional fee which (should be) going to the building of new towers to keep up network stability, in an attempt to keep the network traffic down.

    Of course, this is merely an assumption, but if you look at netbooks and such that are on the carriers currently, they are moderately low-powered still to only do a few tasks, and don’t require the extra fee.

    As a power user, something like that doesn’t really entice me. (However, I enjoy streaming hulu.com to my vaio p a-la my G1 wifi hotspot) en route to austin texas (45 mile drive)

    Let me know what you think! :)

    Reply
  • How can a company even tell if you are tethering, I have US cellular and they wouln’t give me a straight answer only that they do not support it and then that I would have to by a black berry phone to make it work. Also when asked if I had been charged they simply told me maybe maybe not. I got my bill and low and behold no charge, I do have unlimited internet on my phone so I believe they can tell no difference between my phone my navigator or computer using the service. Also they were very reluctant to give out the info involved to tether but thank god for the internet i found out all you have to do is put the dial number as #777, no password or user name involved.

    Reply
  • Avatar of Dave

    Can they even tell if your tethering??

    Reply

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